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Employment Allowance fiasco

11th Sep 2020
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ICAEW

I followed ICAEW advice regarding Employment Allowance. See their article https://www.icaew.com/insights/tax-news/2020/aug-2020/employment-allowan...

"The employer is allowed to wait and claim the EA later in the year. There should be no worry about claiming relief for the same employer’s NIC twice, provided that for the time after the date when the EA claim is made there is at least £4,000 of secondary class 1 NIC payable. It is very important to make sure the EA is not set against employer’s NIC that has been claimed under the CJRS."

Gov.uk

HMRC Gov.uk https://www.gov.uk/claim-employment-allowance:

"Employment Allowance allows eligible employers to reduce their annual National Insurance liability by up to £4,000.

You’ll pay less employers’ Class 1 National Insurance each time you run your payroll until the £4,000 has gone or the tax year ends (whichever is sooner)."

I submitted a claim for CJRS Grant for a client based on July 2020 payroll on  4 August 2020. On 3 September 2020, I submitted an EPS to claim for Employment Allowance to reduce August 2020 Employer NI. Our P32 reflected that correctly.

I spent 1 hour 35 minutes with HMRC PAYE helpline yesterday. Although £3,000 Employment Allowance was already claimed for 2019/2020, Full £4,000 Employment Allowance has been spread in 2019/2020 to cover old debt! Apparently, it is automatically done by the system and even if HMRC allocates this Employment Allowance the way I want, the system will reallocate again the same way as before!

Warning

If your client still owes some PAYE & NI from before, ensure that they settle these as soon as possible.

Otherwise there are 2 major issues:

  1. We submitted CJRS Grant claims without accounting for any Employment Allowance but their system says otherwise. HMRC will see it as if we fraudulently claimed for CJRS Grants when it was not our intention.
  2. Our P32 in Brightpay will not match HMRC PAYE & NI in HMRC Tax Service. HMRC will see their system as being correct and our payroll report as being wrong.

I thought it would be good to warn you as I have just come across this. It is causing lots of headaches.

 

 

 

 

Replies (1)

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By Paul Crowley
11th Sep 2020 15:50

All the wages software gets it wrong
The problem is IT Nerds
It would also appear that HMRC do not follow the 'rules' that they have operated to in the past and that are still showing on their website.

Lion has a post re moneysoft
Sage gets it wrong as well so my guess is they all do

Thanks (1)